NETWORK GROUP HOLDINGS PLC
("NGH" or "the Company" or "the Group")
INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 MAY 2009 - REPLACEMENT
The following amendment has been made to the Interim Results announcement
released at 07.00 on 27th August 2009.
The operating profit figure for professional recruitment for the six months to
31 May 2008 in the table in the Chief Executive Officer's statement should read
"564".
The full amended text is shown below.
Network Group Holdings plc (AIM: NGH), the specialist recruitment and business
outsourcing group, today announces interim results for the six months ended 31
May 2009.
For further information please contact:
Network Group Holdings plc 01676 525300
David Waller, Chairman
www.networkgroupholdings.co.uk
Nominated Adviser 020 7492 4777
Dowgate Capital Advisers Limited
Tony Rawlinson / Antony Legge
Broker 020 7492 4799
Dowgate Capital Stockbrokers Limited
Philip Dumas
CHAIRMAN'S STATEMENT
The first half of the year has seen extremely difficult market conditions and
following the activity of last year, with the purchase and subsequent disposal
of Pertemps People Development Group ("PPDG"), the focus for this year has been
very much to guide the Group through these challenging economic times. This will
continue to be the focus for the remainder of the year.
Financial Results
A summary of the financial performance for the half year ended 31 May 2009,
compared to the corresponding period in 2008 is set out as follows:
6 months ended 6 months ended
31 May 2009 31 May 2008
£000 £000
Revenue * 26,393 29,185
Operating (loss) / profit * (766) 906
(Loss) / profit before tax * ^ (954) 599
Profit from discontinued - 393
operations
* The above amounts relate to the continuing operations of NGH.
^ The (loss) / profit before tax is stated before "Other Items", being the
movement in the value of the liabilities associated with the equity conversion
mechanism, and the movement in the mark to market value of the Group's interest
rate collar.
The reported profit for the period, after Other Items, is £376,000 (6 months
ended 31 May 2008: £726,000, year ended 30 November 2008: £1,879,000). However,
the income statement includes a credit of £1,321,000 (6 months ended 31 May
2008: £nil, year ended 30 November 2008: £233,000 charge), presented within the
Other Items column, in respect of the movement in the value of the liabilities
associated with the Group's equity conversion mechanism. The liability is
calculated using the historical profits of participating subsidiaries and with
a recent reduction in profits, the value of the liability has reduced causing a
credit to the income statement.
Also included within Other Items is a charge of £40,000 (6 months ended 31 May
2008: £nil, year ended 30 November 2008: £126,000) in respect of the movement
in value of the Group's interest rate collar.
The Board views the movement in the value of the equity conversion mechanism
liabilities and the movement in the value of the Group's interest rate collar
as non-operational accounting entries and not the result of operational
activities and consequently has included them within Other Items.
Excluding Other Items, the Group reported an operating loss of £766,000 for the
period, compared to an operating profit of £906,000 for the first half of 2008,
reflecting the tough market conditions in which the Group has been operating.
The Board has chosen to present information in the consolidated income
statement both before and after the inclusion of Other Items as described
above.
Capital Reconstruction and Anti-embarrassment Clause
In December 2008, the Group discharged the anti-embarrassment clause liability
relating to the sale of PPDG. Under the anti-embarrassment clause, an element
of the proceeds received from the sale were required to be passed back to the
original shareholders in exchange for the shares in NGH that were issued on the
original acquisition of PPDG. The cash held in escrow and the shares held in
the acquiring company, both of which were stated in the 30 November 2008
balance sheet, were used to firstly buy-back, and subsequently cancel, 39.9m
shares in NGH and secondly, to purchase 6.5m shares in NGH into a newly-formed
Employee Benefit Trust. NGH underwent a process of reducing its share premium
prior to the buy-back and purchase of shares. The balance sheet of the Group at
31 May 2009 reflects the transactions described above. As I stated in my report
in the statutory accounts for the year ended 30 November 2008, the Group
retained £5.1m cash from the disposal proceeds of PPDG and a pre-disposal
dividend, before the payment of costs of disposal and amounts payable as part
of the original purchase.
Partnering Principles
The partnering principles upon which NGH is founded have been further
demonstrated recently by the serving of an equity conversion notice in respect
of one minority shareholder of the Group's subsidiaries. The directors are
currently finalising the details of the conversion of the subsidiary
shareholding into NGH shares. Conversion is expected to be completed in the
near future at a value estimated to be in the region of £10,000.
Outlook
We must continue to be cautious in our outlook in these challenging economic
conditions, which make it very difficult to predict the remainder of the
current year.
The Group continues to address its overhead structure across all areas of the
business and will continue to do so as long it remains necessary. The Group
expects to be in a position to take advantage of the upturn in the economy as
it comes.
D Waller
Chairman
26 August 2009
CHIEF EXECUTIVE OFFICER'S STATEMENT
The first 6 months of the current year have been extremely challenging as a
result of the economic conditions.
Financial and Operational Review
The business performance for the first half of the year reflects the tough
market conditions in which the Group has been operating. The revenue and
operating profits for our two divisions, with further analysis of our
recruitment sector, is provided below:
6 months ended 31 May 2009 6 months ended 31 May 2008
Revenue Operating Revenue Operating
profit/(loss) profit/(loss)
£000 % £000 £000 % £000
Professional 2,820 10.7 (241) 4,132 14.2 564
recruitment *
Technical recruitment* 11,574 43.8 (450) 14,131 48.4 300
Public sector 8,938 33.9 129 7,617 26.1 18
recruitment *
Central recruitment 105 0.4 (148) 197 0.7 (226)
function *
Recruitment total * 23,437 88.8 (710) 26,077 89.4 656
Business process 2,956 11.2 234 3,108 10.6 612
outsourcing*
Central group costs * - - (170) - - (311)
Total * 26,393 100.0 (646) 29,185 100.0 957
* The above amounts relate to the continuing operations of NGH.
Note that the total operating profit / (loss) shown above excludes amortisation
of intangible assets of £40,000 (2008: £37,000) and share based payment charges
of £80,000 (2008: £14,000). Operating (loss) / profit is shown in the income
statement as £(766,000) (2008: £906,000).
Recruitment
Professional recruitment sector
Revenue for the six months ended 31 May 2009 was £2,820,000 compared to £
4,132,000 for the corresponding period last year. This represented 12.0% (2008:
15.8%) of the recruitment division revenue and 10.7% (2008: 14.2%) of total
revenue. The operating loss for the sector was £241,000 compared to an
operating profit of £564,000 for the corresponding period last year.
The professional sector revenue is predominantly generated from permanent
placements, which have been affected more than temporary recruitment by the
economic conditions.
Technical recruitment sector
Revenue for the six months ended 31 May 2009 was £11,574,000 compared to £
14,131,000 for the corresponding period last year. This represented 49.4%
(2008: 54.2%) of the recruitment division revenue and 43.8% (2008: 48.4%) of
total revenue. The operating loss for the sector was £450,000 compared to an
operating profit of £300,000 for the corresponding period last year.
The businesses comprising the technical recruitment sector have a bias towards
temporary and contract placements in diverse markets. The fall in revenue
predominantly arose from the divisions specialising in blue and white collar
construction.
Public sector recruitment
Revenue for the six months ended 31 May 2009 was £8,938,000 compared to £
7,617,000 for the corresponding period last year. This represented 38.1% (2008:
29.2%) of the recruitment division revenue and 33.9% (2008: 26.1%) of total
revenue. The operating profit for the sector was £129,000 compared to an
operating profit of £18,000 for the corresponding period last year.
Public sector revenue is predominantly derived from temporary and contract
revenue and the increase in revenue for this sector has predominantly arisen
from the Healthcare division which is starting to benefit from several years of
investment.
This sector benefits from longer term government funded contracts which the
Board views as more resilient in these challenging economic conditions.
Business Process Outsourcing
Revenue for the six months ended 31 May 2009 was £2,956,000 compared to £
3,108,000 for the corresponding period last year. This represented 11.2% (2008:
10.6%) of total revenue. The operating profit for the sector was £234,000
compared to an operating profit of £612,000 for the corresponding period last
year.
The division continues to benefit from the temporary recruitment revenues of
its major customer whilst continuing to increase its customer base.
CHIEF EXECUTIVE OFFICER'S STATEMENT (continued)
Balance Sheet & Funding
The balance sheet includes liabilities within current and non-current
liabilities totalling £3,549,000 (31 May 2008: £10,763,000, 30 November 2008: £
4,870,000) (see note 7) in respect of the equity conversion mechanism for the
subsidiary minority shareholders. The view of the Board is that these equity
conversion mechanisms will benefit NGH, with it being highly probable that
these liabilities will be settled in equity shares and not in cash (with the
exception of £316,000).
Under the recent trading conditions the net debt of the Group has fallen to £
5.0m at the balance sheet date compared to £8.4m at 30 November 2008.
The Group meets its day to day working capital requirements through a rolling
credit facility which is due for renewal in September 2010. There are financial
covenants attached to the rolling credit facility linked to the profitability
of the Group. The current economic conditions create uncertainty over the level
of demand for certain services provided by the Group. Consequently, during the
current economic conditions, there is uncertainty over the level of
profitability of the Group. The Group's forecasts and projections, taking
account of reasonably possible changes in trading performance, and the measures
reasonably available to the Group, indicate that the Group should be able to
operate within the current facility, net debt to EBITDA and interest cover
covenants. After making the appropriate enquiries, the directors have a
reasonable expectation that the Group has adequate resources for the
foreseeable future. Accordingly, they continue to adopt the going concern basis
in preparing this interim financial information.
Ongoing Strategy
The Group remains focussed on the growth of its specialised recruitment
businesses and its business process outsourcing business.
The market conditions remain extremely difficult, however the Group has
addressed and continues to address its cost base. The Group expects to be in a
position to take advantage of the upturn in the economy as it comes.
Finally, I would like to pay tribute to the dedication of our staff, who
continue to work extremely hard in these challenging times.
T Watts
Chief Executive Officer
26 August 2009
CONSOLIDATED INCOME STATEMENT
For the six months ended 31 May 2009
Unaudited 6 months ended Unaudited 6 months ended Audited year ended 30
31 May 2009 31 May 2008 November 2008
Before Other After Before Other After Before Other After
other items other other items other other items other
items * items items * items items * items
Note £000 £000 £000 £000 £000 £000 £000 £000 £000
Continuing
operations
Revenue 26,393 - 26,393 29,185 - 29,185 61,637 - 61,637
Cost of sales (17,461) - (17,461) (17,384) - (17,384) (37,683) - (37,683)
----- ----- ----- ----- ----- ----- ----- ----- -----
GROSS PROFIT 8,932 - 8,932 11,801 - 11,801 23,954 - 23,954
Administrative (9,578) - (9,578) (10,881) - (10,881) (22,483) - (22,483)
expenses
Loss on partial - - - - - - (220) - (220)
disposal of
subsidiaries
Amortisation of (40) - (40) (37) - (37) (99) - (99)
goodwill and
intangible
assets
Share based (80) - (80) (14) - (14) (49) - (49)
payments
----- ----- ----- ----- ----- ----- ----- ----- -----
Total (9,698) - (9,698) (10,932) - (10,932) (22,851) - (22,851)
administrative
expenses
Share of - - - 37 - 37 - - -
results of
associates
----- ----- ----- ----- ----- ----- ----- ----- -----
OPERATING (766) - (766) 906 - 906 1,103 - 1,103
(LOSS) / PROFIT
Investment 10 1,321 1,331 26 - 26 73 - 73
revenues
Finance (198) (40) (238) (333) - (333) (696) (359) (1,055)
expenses
----- ----- ----- ----- ----- ----- ----- ----- -----
(LOSS) / PROFIT (954) 1,281 327 599 - 599 480 (359) 121
BEFORE TAX
Tax on (loss) / 4 49 - 49 (266) - (266) (385) - (385)
profit on
ordinary
activities
----- ----- ----- ----- ----- ----- ----- ----- -----
(LOSS) / PROFIT (905) 1,281 376 333 - 333 95 (359) (264)
FOR THE PERIOD
FROM CONTINUING
OPERATIONS
Discontinued
operations
Profit for the - - - 393 - 393 2,143 - 2,143
period from
discontinued
operations
----- ----- ----- ----- ----- ----- ----- ----- -----
(LOSS) / PROFIT (905) 1,281 376 726 - 726 2,238 (359) 1,879
FOR THE PERIOD
----- ----- ----- ----- ----- ----- ----- ----- -----
Attributable
to:
Equity holders (845) 1,281 436 455 - 455 1,339 (359) 980
of the parent
Minority (60) - (60) 271 - 271 899 - 899
interest
----- ----- ----- ----- ----- ----- ----- ----- -----
(905) 1,281 376 726 - 726 2,238 (359) 1,879
----- ----- ----- ----- ----- ----- ----- ----- -----
(Loss) /
earnings per
share (pence)
(note 5)
From continuing
operations
Basic (1.3)p 2.0p 0.7p 0.3p - 0.3p (0.4)p (0.4)p (0.8)p
Diluted (1.3)p 2.0p 0.7p 0.3p - 0.3p (0.4)p (0.4)p (0.8)p
From continuing
and
discontinued
operations
Basic (1.3)p 2.0p 0.7p 0.6p - 0.6p 1.5p (0.4)p 1.1p
Diluted (1.3)p 2.0p 0.7p 0.6p - 0.6p 1.5p (0.4)p 1.1p
* Other items includes the movement in the value of the liabilities associated
with the equity conversion mechanism and the movement in the mark to market
valuation of the Group's interest rate collar.
CONSOLIDATED BALANCE SHEET
As at 31 May 2009
Unaudited Unaudited Audited as
as at 31 as at 31 at 30
May 2009 May 2008 November
2008
Note £000 £000 £000
ASSETS
NON-CURRENT ASSETS
Goodwill 3,626 3,589 3,556
Other intangible assets 117 178 157
Property, plant and equipment 545 605 569
Interest in associates - 114 -
Other investments 5 - -
Deferred tax asset 138 70 -
---------- ---------- ----------
4,431 4,556 4,282
---------- ---------- ----------
CURRENT ASSETS
Short term investments - - 6,852
Trade and other receivables 7,716 12,720 13,986
Cash held in Escrow - - 10,512
Cash and cash equivalents 1,273 1,419 1,610
Assets held for sale - 28,515 -
---------- ---------- ----------
8,989 42,654 32,960
---------- ---------- ----------
TOTAL ASSETS 13,420 47,210 37,242
---------- ---------- ----------
LIABILITIES & EQUITY
CURRENT LIABILITIES
Trade and other payables 6,682 7,203 7,952
Current tax liabilities 236 399 727
Bank overdrafts and loans 14 15 14
Financial liabilities 7 2,796 2,523 2,293
Liabilities directly associates - 8,941 -
with assets classified as held
for sale
Anti-embarrassment clause - - 17,364
liability
---------- ---------- ----------
9,728 19,081 28,350
NON-CURRENT LIABILITIES
Bank loans 6,267 11,032 10,025
Other loans - 1,600 -
Financial liabilities 7 753 8,240 2,577
Deferred tax - - 87
---------- ---------- ----------
7,020 20,872 12,689
EQUITY
Share capital 65 105 105
Share capital redemption reserve 40 - -
Share premium - 16,691 16,948
Special reserve 300 - -
Investment in own shares (2,427) - -
Share based payment reserve 158 109 87
Merger reserve 1,001 1,001 1,001
Retained earnings 748 (874) 156
Anti-embarrassment clause reserve - - (17,607)
---------- ---------- ----------
(115) 17,032 690
Minority interest 336 988 383
Other reserve (3,549) (10,763) (4,870)
---------- ---------- ----------
Total minority interest (3,213) (9,775) (4,487)
---------- ---------- ----------
TOTAL LIABILITIES & EQUITY 13,420 47,210 37,242
---------- ---------- ----------
CONSOLIDATED CASHFLOW STATEMENT
For the six months ended 31 May 2009
Unaudited 6 Unaudited 6 Audited
months months year ended
ended 31 ended 31 30 November
May 2009 May 2008 2008
Note £000 £000 £000
NET CASH GENERATED BY / (USED IN) 9 4,063 (403) (824)
OPERATING ACTIVITIES
INVESTING ACTIVITIES
Interest received 10 26 50
Dividends received from assets - - 674
held for resale
(Payments of costs associated (425) - 3,677
with) / proceeds on disposal of
assets held for resale
Proceeds on disposal of property, 9 - 6
plant and equipment
Purchases of property, plant and (108) (149) (279)
equipment
Acquisition of subsidiary (33) (1,087) (1,790)
undertakings
Purchases of other investments (5) - -
---------- ---------- ----------
NET CASH (USED IN) / FROM (552) (1,210) 2,338
INVESTING ACTIVITIES
---------- ---------- ----------
FINANCING ACTIVITIES
Dividends paid to minority (90) (49) (377)
interests
Repayments of borrowings (3,758) (7) (1,614)
New bank loans raised - 1,500 500
Decrease in bank overdrafts - (15) (16)
---------- ---------- ----------
NET CASH (USED IN) / FROM (3,848) 1,429 (1,507)
FINANCING ACTIVITIES
---------- ---------- ----------
NET (DECREASE) / INCREASE IN CASH (337) (184) 7
AND CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS AT 1,610 1,603 1,603
BEGINNING OF PERIOD
---------- ---------- ----------
CASH AND CASH EQUIVALENTS AT END 1,273 1,419 1,610
OF PERIOD
---------- ---------- ----------
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the six months ended 31 May 2009
Unaudited 6 Unaudited 6 Audited year
months months ended ended 30
ended 31 May 2008 November
2008
31 May 2009
£000 £000 £000
Opening equity 690 (83) (83)
New shares issued - 16,611 16,868
Share based payment costs 80 49 299
Profit for period 436 455 980
Revaluation of equity conversion (1,321) - 233
mechanism
Anti-embarrassment clause - - (17,607)
---------- ---------- ----------
Closing equity (115) 17,032 690
---------- ---------- ----------
MINORITY INTERESTS
Unaudited 6 Unaudited 6 Audited
months ended months ended year ended
31 May 2009 31 May 2008 30 November
2008
£000 £000 £000
Opening balance (4,487) (3,729) (3,729)
Share of (loss) / profit for the period (60) 271 899
Equity conversion mechanism
* upon issue - (6,765) (6,765)
* transfer from retained earnings 1,321 - (233)
* conversion - - 259
* upon lapse - - 5,868
Other movements 13 448 (786)
---------- ---------- ----------
Closing balance (3,213) (9,775) (4,487)
---------- ---------- ----------
NOTES TO THE INTERIM REPORT
For the six months ended 31 May 2009
1. GENERAL INFORMATION
(a) The Interim Report and financial statements were approved by the Board
of Directors on 26 August 2009.
(b) A copy of the Interim Statement is available for download from the
Company's website. Copies will also be sent to all shareholders and copies
are available for collection indefinitely from the Company's Registered
Office at the address below:
Network Group Holdings plc
Meriden Hall
Main Road
Meriden
Warwickshire
CV7 7PT
Telephone: +44 (0) 1676 525300
www.networkgroupholdings.co.uk
2. SIGNIFICANT ACCOUNTING POLICIES
Basis of accounting
The consolidated financial statements have been prepared in accordance with
International Financial Reporting Standards (IFRSs). The consolidated financial
statements have also been prepared in accordance with IFRSs adopted by the
European Union and therefore the Group financial statements comply with Article
4 of the EU IAS Regulation.
The consolidated financial statements have been prepared on the historical cost
basis. The principal accounting policies are set out below.
The financial information for the year ended 30 November 2008 does not
constitute statutory accounts as defined by s240 of the Companies Act 1985. A
copy of the statutory accounts for the year ended 30 November 2008, prepared
under IFRS, on which the auditors gave an unqualified opinion which did not
contain a statement made under s237(2) or s237(3) of the Companies Act 1985,
has been filed with the Registrar of Companies.
The Group meets its day to day working capital requirements through a rolling
credit facility which is due for renewal in September 2010. There are financial
covenants attached to the rolling credit facility linked to the profitability
of the Group. The current economic conditions create uncertainty over the level
of demand for certain services provided by the Group. Consequently, during the
current economic conditions, there is uncertainty over the level of
profitability of the Group. The Group's forecasts and projections, taking
account of reasonably possible changes in trading performance, and the measures
reasonably available to the Group, indicate that the Group should be able to
operate within the current facility, net debt to EBITDA and interest cover
covenants. After making the appropriate enquiries, the directors have a
reasonable expectation that the Group has adequate resources for the
foreseeable future. Accordingly, they continue to adopt the going concern basis
in preparing this interim financial information.
Basis of consolidation
The consolidated financial information includes the results, cash flows and
assets and liabilities of NGH and the entities under its control (its
subsidiaries). Control is achieved where NGH has the power to govern the
financial and operating policies of an investee entity so as to obtain benefits
from its activities.
Minority interests in the net assets of the consolidated subsidiaries are
identified separately from the NGH equity therein. Minority interests consist
of the amount of those interests at the date of the original business
combination (see below) and the minority's share of changes in equity since the
date of the combination. Losses applicable to the minority in excess of the
minority's interest in the subsidiary's equity are allocated against the
interests of NGH.
Equity conversion mechanism
The Group operates an equity conversion mechanism whereby the minority
shareholders of subsidiary undertakings are able to transfer their minority
shareholdings to NGH in exchange for equity NGH shares or cash. The choice of
consideration is at the discretion of the directors of NGH. It is the current
intention of the directors to discharge the liability in equity shares and not
by way of payment in cash, with the exception of £316,000.
The accounting treatment follows the application of IAS 39: Financial
Instruments: Recognition and Measurement. Upon the creation of a new equity
conversion mechanism, liabilities are recognised within current and non-current
liabilities, with a corresponding debit to the other reserve within minority
interests. The financial liability arising from the Group's equity conversion
mechanism is calculated based on the appropriate historical profit figures and
the largest potential multiple representing the directors' best estimate of the
liability available for each relevant subsidiary undertaking, discounted back
to present value for those options which cannot be exercised within the next 12
months. Consequently, the results of actual conversions may differ from these
estimations. At each balance sheet date the fair value is recalculated based on
the appropriate historical profit figures, with any movement in the liability
being recognised within investment revenues or finance expenses in the income
statement. The movement in the income statement is then transferred from
retained earnings to the other reserve within minority interests.
Upon exercise of the equity conversion mechanism, an element of the liability
is discharged, and an element of the other reserve is transferred as part of
the acquisition.
3. SEGMENTAL ANALYSIS
Business Segments
For management purposes the Group is currently organised into the following
operating divisions - Recruitment Services and Business Process Outsourcing.
The profit from discontinued activities for the 6 months ended 31 May 2008 and
year ended 30 November 2008 relates to the Group's subsidiary undertakings that
operated in the sector of training and welfare to work. The assets held for
sale and liabilities directly associated with assets classified as held for
sale in the balance sheet as at 31 May 2008 also relate to the activities of
this sector. The businesses operating in this sector were disposed of by the
Group in September 2008.
Geographical Segments
The Group has not provided an analysis on a geographical basis as substantially
all turnover arose in the United Kingdom.
4. TAX
Income tax for the 6 months ended 31 May 2009 is charged at 28% (6 months ended
31 May 2008: 29.3%, year ended 30 November 2008: 28.6%), representing the best
estimate of the average annual income tax rate expected for the full period,
applied to the pre-tax income of the six month period.
5. (LOSS) / EARNINGS PER ORDINARY SHARE
From continuing and discontinued operations
The calculation of the basic and diluted earnings per share is based on the
following data.
Earnings Unaudited 6 months Unaudited 6 months Audited year ended
ended 31 May 2009 ended 31 May 2008 30 November 2008
Before Other After Before Other After Before Other After
other items other other items other other items other
items items items items items items
£000 £000 £000 £000 £000 £000 £000 £000 £000
Earnings for (845) 1,281 436 455 - 455 1,339 (359) 980
the purpose
of basic
earnings per
share being
net profit
attributable
to equity
holders of
the parent
and Earnings
for the
purposes of
diluted
earnings per
share
----- ----- ----- ----- ----- ----- ----- ----- -----
Number of shares Unaudited 6 Unaudited 6 Audited year
months ended months ended ended
31 May 2009 31 May 2008 30 November 2008
000 000 000
Weighted average number of ordinary 63,119 72,736 89,048
shares for the purpose of basic earnings
per share
Effect of dilutive potential ordinary 23 362 405
shares - share options
---------- ---------- ----------
Weighted average number of ordinary 63,142 73,098 89,453
shares for the purposes of diluted
earnings per share
---------- ---------- ----------
The weighted average number of ordinary shares for the purpose of basic
earnings per share at 31 May 2009 excludes 6,500,000 shares held by the Group's
Employee Benefit Trust.
The potential ordinary shares that would be issued under the equity conversion
mechanism described in note 7 have not been included in the diluted earnings
per share calculation due to the uncertainty over the number of shares that
would be issued and the timing of these shares being issued, in accordance with
IAS 33: Earnings per share.
From Unaudited 6 months Unaudited 6 months Audited year ended 30
continuing ended 31 May 2009 ended 31 May 2008 November 2008
operations
Before Other After Before Other After Before Other After
other items other other items other other items other
items items items items items items
£000 £000 £000 £000 £000 £000 £000 £000 £000
Net profit (845) 1,281 436 455 - 455 1,339 (359) 980
attributable
to equity
holders of
the parent
Adjustments - - - (263) - (263) (1,697) - (1,697)
to exclude
profit for
the period
from
discontinued
operations
----- ----- ----- ----- ----- ----- ----- ----- -----
Earnings (845) 1,281 436 192 - 192 (358) (359) (717)
from
continuing
operations
for the
purpose of
basic
earnings per
share
excluding
discontinued
operations
and Earnings
from
continuing
operations
for the
purpose of
diluted
earnings per
share
excluding
discontinued
operations
----- ----- ----- ----- ----- ----- ----- ----- -----
5. (LOSS) / EARNINGS PER ORDINARY SHARE (continued)
The profit for the period from discontinued operations of £nil (6 months ended
31 May 2008: £393,000, year ended 30 November 2008: £2,143,000) has been
adjusted for minority interests of £nil (6 months ended 31 May 2008: £130,000,
year ended 30 November 2008: £446,000) resulting in the amounts above.
The denominators used are the same as those detailed above for both basic and
diluted earnings per share from continuing and discontinued operations.
From Unaudited 6 months Unaudited 6 months Audited year ended
discontinued ended 31 May 2009 ended 31 May 2008 30 November 2008
operations
Before Other After Before Other After Before Other After
other items other other items other other items other
items items items items items items
Basic - - - 0.3p - 0.3p 1.9p - 1.9p
Diluted - - - 0.3p - 0.3p 1.9p - 1.9p
6. DIVIDENDS
The directors have not recommended the payment of a dividend in any period.
7. FINANCIAL LIABILITIES
The current liability of £2,796,000 (31 May 2008: £2,523,000, 30 November 2008:
£2,293,000) and the non-current liability of £753,000 (31 May 2008: £8,240,000,
30 November 2008: £2,577,000) arise from the application of IAS 39: Financial
Instruments: Recognition and Measurement in respect of the Group's equity
conversion mechanism, whereby the minority shareholders of subsidiary
undertakings are able to transfer their minority shareholdings to NGH in
exchange for equity NGH shares or cash. The choice of consideration is at the
discretion of the directors of NGH. It is the current intention of the
directors to discharge the liability in equity shares and not by way of payment
in cash (with the exception of £316,000).
The liability is calculated based on a multiple of historical profits of the
relevant subsidiary undertaking.
Since the balance sheet date, an equity conversion notice has been received in
respect of one minority shareholder of the Group's subsidiaries. The directors
are currently finalising the details of the conversion of the subsidiary
shareholding into NGH shares. Conversion is expected to be completed in the
near future at a value estimated to be in the region of £10,000.
A credit of £1,321,000 (6 months ended 31 May 2008: £nil, year ended 30
November 2008: £233,000 charge) has been recognised in the income statement
during the period in respect of the decrease / increase in the value of the
liabilities.
8. NET ASSETS / (LIABILITIES)
At 31 May 2009, the net (liabilities) / assets of the Group was £(3,328,000)
(31 May 2008: £7,257,000, 30 November 2008: £(3,797,000)).
The net (liabilities) / assets at 31 May 2009 are impacted by a total liability
of £3,549,000 (31 May 2008: £10,763,000, 30 November 2008: £4,870,000) in
respect of the equity conversion mechanism as described in note 7. The
directors currently expect this liability to be discharged by way of equity
share capital, and not through the payment of cash, with the exception of £
316,000. Therefore, the directors believe it is appropriate to also present the
net assets / (liabilities) excluding the liability for the equity conversion
mechanism. The net assets / (liabilities) at 31 May 2009, excluding the
liability for the equity conversion mechanism were £221,000 (31 May 2008: £
18,020,000, 30 November 2008: £1,073,000)
If full conversion of all minority subsidiary shareholdings subject to the
arrangements into equity shares of Network Group Holdings plc had taken place
at the balance sheet date, net assets of the Group would have increased by a
minimum of £3,549,000 (31 May 2008: £10,763,000, 30 November 2008: £4,870,000).
9. NOTES TO THE CONSOLIDATED CASHFLOW STATEMENT
Unaudited 6 Unaudited 6 Audited year
months ended months ended ended 30
31 May 2009 31 May 2008 November 2008
£000 £000 £000
Operating activities
Operating (loss) / profit from:
- Continuing operations (766) 906 1,103
- Discontinued operations - - -
---------- ---------- ----------
(766) 906 1,103
Adjusted for:
Share of operating profit in associates - (37) -
including goodwill impairment
Depreciation of property, plant and 156 189 388
equipment
Impairment of goodwill - - 18
Amortisation of intangible assets 40 37 81
Profit on disposal of property, plant and (2) - -
equipment
Profit on partial disposal of - - 220
subsidiaries
Movement in assets held for sale - 429 -
Share based payment costs 80 14 49
---------- ---------- ----------
Operating cash flows before movements in (492) 1,538 1,859
working capital
Decrease / (increase) in receivables 6,273 51 (1,341)
(Decrease) / increase in payables (859) (1,303) 17
---------- ---------- ----------
Cash generated by operations 4,922 286 535
Corporation tax paid (677) (364) (625)
Interest paid (182) (325) (734)
---------- ---------- ----------
Net cash generated by / (used in) 4,063 (403) (824)
operating activities
---------- ---------- ----------